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Book One of the Chinese Civil Code: China’s General Provisions of Civil Law Promulgated

On 15 March 2017, China’s General Provisions of Civil Law (“General Provisions”) were adopted at the 5th Session of the 12th National People’s Congress and promulgated the same day. The General Provisions will come into force on 1 October 2017.

As “Book One” of the planned Chinese Civil Code, the General Provisions include general principles that are also applicable to the other Books to come. The other five Books of the planned Chinese Civil Code are

  • Contracts,
  • Property,
  • Torts,
  • Marriage and Family, and
  • Inheritance.

The Chinese legislator has passed detailed laws in all of the above-mentioned areas in the last two decades. By means of a unified Civil Code all laws in such areas will be reconciled and systemised. The bills of the other five Books are scheduled to be brought for the first reading in 2018 and to be adopted and promulgated by the 13th National People’s Congress in 2020.

Below, we summarize the major changes and new developments under the General Provisions in particular in comparison to the General Principles of Civil Law adopted in 1986 (“1986 General Principles”). The 1986 General Principles have not yet been repealed. However, as of 1 October 2017 inconsistent provisions will be superseded by the General Provisions as the new law.

1. New basic principle - “Green”

The General Provisions add a “Green Principle” to the existing fundamental civil law principles such as equality, voluntariness, fairness, good faith and lawfulness. Conducting legal acts shall therefore also be in favour of saving resources and protecting the ecological environment. However, the General Provisions do not explicitly address the consequences of the legal acts in violation of this new basic principle and leave details to special laws and regulations for environmental protection.

2. Application of custom

The General Provisions explicitly allow the application of custom to handling civil disputes in the absence of relevant law to the extent the public order shall not be violated.

3. Legal capacity for foetuses and minors

The General Provisions recognise and protect the legal capacity of foetuses in the cases of inheritance and accepting gifts, unless they were born dead.

They also lower the age threshold for minors with limited legal capacity from 10 to 8 years and allow such minors among others to independently conduct legal acts when they only receive (legal) benefit(s).

4. No more guardianship obligations for employers

The 1986 General Principles have imposed the guardianship obligations on the employers in case no close relatives of the employees in need act as the guardian(s) of those employees. The General Provisions abolish this guardianship obligation of employers towards their employees in need.

5. Legal persons and non-legal person organisations

The General Provisions reclassify the legal persons into three categories, i.e. profit-oriented legal persons, non-profit-oriented legal persons and special legal persons. Profit-oriented legal persons include typically limited liability companies, stock companies and other enterprise legal persons. Non-profit-oriented legal persons are institutional units (“shi ye dan wei”), social organisations, foundations and social service institutions etc. Special legal persons refer to governmental authorities, village collective organisations, urban-rural cooperation organisations, etc.

Sole proprietorship enterprises, partnership enterprises and non-legal person professional service institutions are non-legal person organisations. Their investors / founders shall in general assume the unlimited liabilities for such non-legal person organisations.

6. Protection of personal information

The General Provisions explicitly protect the personal information of individuals. Any organisation or individual, who needs to obtain personal information of other individual(s), shall obtain it lawfully and ensure the security of such information and shall not illegally collect, use, process or transmit personal information of others. Illegal sales, provision and disclosure of personal information are prohibited.

The General Provisions also recognise the protection of “data” and “online virtual assets”, but leave details to the more special laws and regulations to come in those areas.

7. Declaration of Intent

Compared to the Chinese Contract Law, which regulates the declaration of intent almost only in connection with offer and acceptance, a declaration of intent is now legally recognized as the basic means to establish, change and end civil legal relationships. The General Provisions further provide for different manners how a declaration of intent can be made and conditions for its validity, withdrawal and interpretation, etc.

8. Forfeiting of revocation right

The General Provisions regulate the circumstances in detail under which a party’s right to revoke a relevant legal act will be forfeited. In all cases, if a party entitled to revoke fails to exercise its right within 5 years after occurrence of the relevant legal act, its revocation right will be forfeited.

9. Agency

According to the General Provisions, unless consented to or recognised retroactively by the principal, the agent may not on behalf of the principal conduct legal acts with himself or with other principal(s) of him. In practice, the legal representative and officers of an entity shall better obtain the prior written approvals from the relevant organ with due authorities of the entity before conducting any transaction with the entity for themselves or other principal(s) of them.

Moreover, if another party can reasonably believe that the apparent agent possesses the relevant authorities, although he indeed does not have them, a principal may be legally bound by the legal acts of the apparent agent. In order to prevent apparent authority cases, as principal the enterprises shall adopt detailed company rules such as employee manual, management rules and chop rules as well as take all necessary steps (e.g. retrieving documents and chops, revoking power of attorney, conducting filing, registration, notification and public announcement) to avoid leaving any chance for third parties’ “reasonable believe”.

10. Statute of limitations and preclusive period

Unless special laws provide for otherwise (such as 1-year statute of limitations for labour disputes), the General Provisions extend the regular statute of limitations from 2 to 3 years. The statute of limitations is not subject to the disposition of the parties and the associated benefits cannot be waived by parties in advance. But without being raised by a relevant party, the People’s Court (likely also arbitral tribunals) shall not apply the statute of limitations actively.

In contrast to the statute of limitations, the statutory or contractual existence period of certain rights such as revocation rights and termination rights cannot be suspended or interrupted. Upon expiration of such period, the relevant rights will be forfeited. In view of such legal consequence of the expiration of the preclusive period, this might likely be subject to judicial notice even without a party’s plea.

11. Others

The General Provisions generally exculpate voluntary helpers in emergencies from civil liabilities. Whether this rule will also apply in the event of damage/injuries caused by helpers’ intentional and gross negligent conducts, is subject to future judicial practice.

Not least, name, portrait, honour, reputation of (Chinese) heroes and martyrs are also protected by the General Provisions. However, it is unclear in the General Provisions how to define “heroes” and “martyrs”.

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